Lemon Law Philippines

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Republic of the Philippines
Congress of the Philippines
Metro Manila

REPUBLIC ACT NO. 10642
AN ACT STRENGTHENING CONSUMER PROTECTION
IN THE PURCHASE OF BRAND NEW MOTOR VEHICLES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:
SECTION 1. Short Title. – This Act shall be known as the “Philippine Lemon Law”.
SEC. 2. Declaration of Policy. – It is hereby declared the policy of the State to promote full
protection to the rights of consumers in the sale of motor vehicles against business and
trade practices which are deceptive, unfair or otherwise inimical to consumers and the
public interest.
The State recognizes that a motor vehicle is a major consumer purchase or
investment. Hence, the rights of consumers should be clearly defined, including
the means for redress for violations thereof.
SEC. 3. Definition of Terms. – As used in this Act:
(a) Brand new motor vehicle refers to a vehicle constructed entirely from new
parts and covered by a manufacturer’s express warranty at the time of purchase
that it has never been sold or registered with the Department of Transportation
and Communications (DOTC) or an appropriate agency or authority, and has
never been operated on any highway of the Philippines, or in any foreign state
or country;
(b) Collateral charges refer to the fees paid’ to the Land Transportation Office
(LTO) for the registration of a brand new motor vehicle and other incidental
expenses such as, but not limited to, the cost of insurance pertaining to the
vehicle, chattel mortgage fees and interest expenses if applicable;

(c) Comparable motor vehicle refers to a motor vehicle that is identical or
reasonably equivalent to the motor vehicle to be replaced, in terms of
specifications and values, subject to availability, as the motor vehicle existed at
the time of purchase: Provided, That there shall be an offsetting from this value
for reasonable allowance for its use;
(d) Consumer refers to any person, natural or juridical, who purchases a brand
new motor vehicle either by cash or credit from an authorized distributor, dealer
or retailer in the Philippines;
(e) Dealer or retailer refers to any person, natural or juridical, authorized by
the manufacturer or distributor to sell brand new motor vehicles directly to the
retail buyers and the public;
(f) Distributor refers to any person, natural or juridical, authorized by the
manufacturer to sell brand new motor vehicles to duly authorized dealers or
retailers;
(g) Implementing agency refers to the Department of Trade and Industry
(DTI), reorganized under Title X, Book IV of Executive Order No. 292, series of
1987, otherwise known as the “Administrative Code of 1987″;
(h) Lemon Law rights period refers to the period ending twelve (12) months
after the date of the original delivery of a brand new motor vehicle to a
consumer or the first twenty thousand (20,000) kilometers of operation after
such delivery, whichever comes first. This shall be the period during which the
consumer can report any nonconformity, as defined in paragraph (k) herein, to
the standards and specifications of the manufacturer, authorized distributor,
authorized dealer or retailer, and pursue any right as provided for under this
Act;
(i) Manufacturer refers to any person, natural or juridical, engaged in the
business of manufacturing or assembling motor vehicles;
(j) Motor vehicle refers to any self-propelled, four (4) wheeled road vehicle
designed to carry passengers including, but not limited to, sedans, coupes,
station wagons, convertibles, pick-ups, vans, sports utility vehicles (SUVs) and
Asian Utility Vehicles (AUVs) but excluding motorcycles, delivery trucks, dump
trucks, buses, road rollers, trolley cars, street sweepers, sprinklers, lawn mowers
and heavy equipment such as, but not limited to, bulldozers, payloaders,

graders, forklifts, amphibian trucks, cranes, and vehicles which run only on rails
or tracks, and tractors, trailers and traction engines of all kinds used exclusively
for agricultural purposes. Trailers having any number of wheels, when propelled
or intended by attachment to a motor vehicle, shall be classified as separate
motor vehicle with no power rating;
(k) Nonconformity refers to any defect or condition that substantially impairs
the use, value or safety of a brand new motor vehicle which prevents it from
conforming to the manufacturer’s or distributor’s standards or specifications,
which

cannot

be

repaired,

but

excluding

conditions

resulting

from

noncompliance by the consumer of his or her obligations under the warranty,
modifications not authorized by the manufacturer or distributor, abuse or
neglect, and damage due to accident or force majeure;
(l) Purchase price refers to the invoice price or the amount of money which the
dealer or retailer actually received for the brand new motor vehicle, in
consideration of the sale of such brand new motor vehicle;
(m) Warranty refers to the written assurance, so labeled, of the manufacturer
of a brand new motor vehicle including any term or condition precedent to the
enforcement of obligations under the warranty; and
(n) Warranty rights period refers to the period provided for under the contract
of sale when the manufacturer would guarantee the materials used, the
workmanship and the roadworthiness of a brand new motor vehicle for ordinary
use or reasonable intended purposes.
SEC. 4. Coverage. – This Act shall cover brand new motor vehicles purchased
in the Philippines reported by a consumer to be in nonconformity with the
vehicle’s manufacturer or distributor’s standards or specifications within twelve
(12) months from the date of .original delivery to the consumer, or up to twenty
thousand (20,000) kilometers of operation after such delivery, whichever comes
first. The following causes of nonconformity shall be excluded:
(a) Noncompliance by the consumer of the obligations under the warranty;
(b) Modifications not authorized by the manufacturer, distributor, authorized
dealer or retailer;
(c) Abuse or neglect of the brand new motor vehicle; and
(d) Damage to the vehicle due to accident or force majeure.

SEC. 5. Repair Attempts. – At any time within the Lemon Law rights period,
and after at least four (4) separate repair attempts by the same manufacturer,
distributor, authorized dealer or retailer for the same complaint, and the
nonconformity issue remains unresolved, the consumer may invoke his or her
rights under this Act.
The repair may include replacement of parts components, or assemblies.
SEC. 6. Notice of Availment of Lemon Law Rights. – Before availing of any
remedy under this Act and subject to compliance with the provisions of Section
5 hereof, the consumer shall, in writing, notify the manufacturer, distributor,
authorized dealer or retailer of the unresolved complaint, and the consumer’s
intention to invoke his or her rights under this Act within the Lemon Law rights
period.
The warranty booklet issued by the manufacturer, distributor, authorized dealer
or retailer shall clearly state the manner and form of such notice to constitute a
valid and legal notice to the manufacturer, distributor, authorized dealer or
retailer. It shall also clearly state the responsibility of the consumer under this
section.
SEC. 7. Availment of Lemon Law Rights. – Subsequent to filing the notice of
availment referred to in the preceding section, the consumer shall bring the
vehicle to the manufacturer, distributor, authorized dealer or retailer from where
the vehicle was purchased for a final attempt to address the complaint of the
consumer to his or her satisfaction.
It shall be the duty of the manufacturer, distributor, authorized dealer or retailer,
upon receipt of the motor vehicle and the notice of nonconformity required
under Section 6 hereof, to attend to the complaints of the consumer including,
as may be necessary, making the repairs and undertaking such actions to make
the vehicle conform to the standards or specifications of the manufacturer,
distributor, authorized dealer or retailer for such vehicle.
In case the nonconformity issue remains unresolved despite the manufacturer,
distributor, authorized dealer or retailer’s efforts to repair the vehicle, pursuant
to the consumer’s availment of his or her Lemon Law rights, the consumer may
file a complaint before the DTI as provided for under this Act: Provided, however,
That if the vehicle is not returned for repair, based on the same complaint,

within thirty (30) calendar days from the date of notice of release of the motor
vehicle to the consumer following this repair attempt within the Lemon Law
rights period, the repair is deemedsuccessful: Provided, finally, That, in the
event that the nonconformity issue still exists or persists after the thirty (30)-day
period but still within the Lemon Law rights period, the consumer may be
allowed to avail of the same remedies under Sections 5 and 6 hereof.
To compensate for the non-usage of the vehicle while under repair and during
the period of availment of the Lemon Law rights, the consumer shall be provided
a reasonable daily transportation allowance, an amount which covers the
transportation of the consumer from his or her residence to his or her regular
workplace or destination and vice versa, equivalent to air-conditioned taxi fare,
as evidenced by official receipt, or in such amount to be agreed upon by the
parties, or a service vehicle at the option of the manufacturer, distributor,
authorized dealer or retailer. Any disagreement on this matter shall be resolved
by the DTI.
Nothing herein shall be construed to limit or impair the rights and remedies of a
consumer under any other law.
SEC. 8. Remedies for Dispute Resolution. – The DTI shall exercise exclusive
and original jurisdiction over disputes arising from the provisions of this Act. All
disputes arising from the provisions of this Act shall be settled by the DTI in
accordance with the following dispute resolution mechanisms:
(a) Mediation
(1) The principles of negotiation, conciliation and mediation towards amicable
settlement between the manufacturer, distributor, authorized dealer or retailer
and the consumer shall be strictly observed;
(2) In the course of its dispute resolution efforts, the DTI shall endeavor to
independently establish the validity of the consumer’s outstanding complaint.
The DTI shall likewise retain the
services
of other government agencies or qualified independent private entities in the
ascertainment of the validity of the consumer’s complaint. Any cost incurred in
establishing the validity of the consumer’s complaint shall be borne jointly by
the consumer and the manufacturer, distributor, authorized dealer or retailer;

(3) The complaint shall be deemed valid if it is independently established that
the motor vehicle does not conform to the standards or specifications set by the
manufacturer, distributor, authorized dealer or retailer;
(4) Upon failure of the negotiation or mediation between the manufacturer,
distributor, authorized, dealer or retailer and the consumer, the parties shall
execute a certificate attesting to such failure; and
(5) At any time during the dispute resolution period, the manufacturer,
distributor, authorized dealer or retailer and the consumer shall be encouraged
to settle amicably. All disputes that have been submitted for mediation shall be
settled not later than ten (10) working days from the date of filing of the
complaint with the DTI.
(b) Arbitration
In the event there is a failure to settle the complaint during the mediation
proceedings, both parties may voluntarily decide to undertake arbitration
proceedings.
(c) Adjudication
(1) In the event that both parties do not undertake arbitration proceedings, at
least one of the parties may commence adjudication proceedings, administered
by the DTI. The DTI shall rely on the qualified independent findings as to
conformity to standards and specifications established herein. In no case shall
adjudication proceedings exceed twenty (20) working days;
(2) In case a finding of nonconformity is arrived at, the DTI shall rule in favor of
the consumer and direct the manufacturer, distributor, authorized dealer or
retailer to grant either of the following remedies to the consumer:
(i) Replace the motor vehicle with a similar or comparable motor vehicle in
terms of specifications and values, subject to availability; or
(ii) Accept the return of the motor vehicle and pay the consumer the purchase
price plus the collateral charges.
In case the consumer decides to purchase another vehicle with a higher value
and specifications from the same manufacturer, distributor, authorized dealer or
retailer, the consumer shall pay the difference in cost.

In both cases of replacement and repurchase, the reasonable allowance for use,
as defined in this Act, shall be deducted in determining the value of the
nonconforming motor vehicle; and
(3) In case a nonconformity of the motor vehicle is not found by the DTI, it shall
rule in favor of the manufacturer, distributor, authorized dealer or retailer, and
direct the consumer to reimburse the manufacturer, distributor, authorized
dealer or retailer the costs incurred by the latter in validating the consumer’s
complaints.
An appeal may be taken from a final judgment or order of the Adjudication
Officer which completely disposes of the case within fifteen (15) days from
receipt thereof. The appeal shall be taken by filing a Memorandum of Appeal
with the Secretary of the DTI, with Notice of Appeal to the Adjudication Officer,
and with a copy duly furnished the adverse party or parties on any of the
following grounds:
(i) Grave abuse of discretion;
(ii) The decision/order is in excess of jurisdiction or authority of the Adjudication
Officer; and
(iii) The decision/order is not supported by the evidence or there is serious error
in the findings of facts.
The Secretary of the DTI shall decide on the appeal within thirty (30) days from
receipt thereof. A party seeking further appeal from the decision of the Secretary
of the DTI may file a case for certiorari to the Court of Appeals under Section 4,
Rule 65 of the Revised Rules of Court.
SEC. 9. Determination of Reasonable Allowance for Use. – For purposes of
this Act, “reasonable allowance for use” shall mean twenty percent (20%) per
annum deduction from the purchase price, or the product of the distance
traveled in kilometers and the purchase price divided by one hundred thousand
(100,000) kilometers, whichever is lower.
SEC. 10.
Disclosure
on Resale. – Should the returned motor vehicle be made available for resale,
the manufacturer, distributor, authorized dealer or retailer shall, prior to sale or
transfer, disclose in writing to the next purchaser of the same vehicle the
following information:

(a) The motor vehicle was returned to the manufacturer, distributor, authorized
dealer or retailer;
(b) The nature of the nonconformity which caused the return; and
(c) The condition of the motor vehicle at the time of the transfer to the
manufacturer, distributor, authorized dealer or retailer.
The responsibility of the manufacturer, distributor, authorized dealer or retailer
under this section shall cease upon the sale of the affected motor vehicle to the
first purchaser.
SEC. 11. Penalty. – The manufacturer, distributor, authorized dealer or retailer
adjudged to have violated the provisions requiring disclosure as mentioned in
the preceding section shall be liable to pay a minimum amount of One hundred
thousand pesos (P100,000.00) as damages to the aggrieved party without
prejudice to any civil or criminal liability they and/or the responsible officer may
incur under existing laws.
SEC. 12. Assistance by Other Agencies. – The DOTC and other agencies,
political subdivisions, local government units, including government-owned
and/or controlled corporations, shall render such assistance as required by the
DTI in order to effectively implement the provisions of this Act.
SEC. 13. Implementing Rules and Regulations. – The DTI shall promulgate
the necessary implementing rules and regulations within, ninety (90) days from
the effectivity of this Act.
SEC. 14. Separability Clause. – If, for any reason, any part or provision of this
Act is declared invalid, such declaration shall not affect the other provisions of
this Act.
SEC. 15. Repealing Clause. – All laws, decrees, executive orders, issuances,
rules and regulations or parts thereof which are inconsistent with the provisions
of this Act are hereby deemed repealed, amended or modified accordingly.
SEC. 16. Effectivity. – This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in any newspaper of .general circulation.
Approved: 15 July 2014.

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